The WSJ says that the G7 are huffing and puffing about the low value of the dollar.

Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and their counterparts from the Group of Seven nations said in a statement: “Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability.” Their words, though mild at first glance, mark a departure from the communiques the officials issued after previous G-7 meetings and appear intended to demonstrate the group’s desire to put a floor under the falling dollar…

The dollar has been in a fairly steady decline since 2002, although it hit its peak against the euro — 82.7 cents per euro — on Oct. 25, 2000. A euro bought $1.5828 at Friday’s 4 p.m. close, marking a 15% fall in the dollar’s value against the common currency during the past year and a 7.8% slide since Dec. 31.

Likewise, the dollar is down 15% against the yen during the past year and 9.5% since the end of 2007. Measured against the currencies of 17 U.S. trading partners, the dollar is down 9.8% from a year ago. The International Monetary Fund, in a report issued this past week, said that the dollar’s 25% inflation-adjusted decline since 2002 is “one of the largest dollar depreciation episodes” since the early 1970s.

You’d think that it might be more effective to say nothing and then engage in market actions that put some of the wise guys out of business. Or perhaps it might have been advisable for the Fed to lower interest rates quickly and in large enough increments not to have produced a virtually risk free environment for currency/commodity speculators over the last eight months. Evidently, the market doesn’t care too much about words, at least so far, if stratospheric oil prices in the face of falling demand are any indication. Forbes:

Oil turned lower as the International Energy Agency’s reduction of its 2008 oil demand forecast encouraged some end-of-week profit-taking, though weakness in the dollar limited losses. The IEA on Friday cut its 2008 oil product demand forecast by 310,000 barrels per day in light of fears the United States-led economic slowdown could reduce consumption growth, weighing on prices. However, with the dollar remaining on the backfoot, prices have been well supported as investors continue to buy into commodities in a bid to hedge against the tumbling U.S. currency…New York’s West Texas Intermediate crude for May delivery was down 52 cents at $109.59 a barrel. On Wednesday, WTI hit an intraday record high of $112.21.

Remember, in the new economy of oil, just like the new economy of real estate in this decade, or the new economy of the internet from 1997-2000: “The new rules are: There are no rules.” Or try this chestnut: “Oil prices have reached what looks like a permanently high plateau.”

This entry was posted on Friday, April 11th, 2008 at 7:29 pm and is filed under Democrats, EU, General, Republicans, business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.